标题_Kimmel_Financial_6e_PowerPoint_Ch11.pptVIP

Dividends Dividends Cash Dividends For a corporation to pay a cash dividend, it must have: Retained earnings - Payment of cash dividends from retained earnings is legal in all states. Adequate cash. Declaration by the Board of Directors. Dividends Dividends Illustration: On Dec. 1, the directors of Media General declare a 50￠ per share cash dividend on 100,000 shares of $10 par value common stock. The dividend is payable on Jan. 20 to shareholders of record on Dec. 22: Dividends Dividends Stock Dividends Pro rata distribution of the corporation’s own stock. Dividends Stock Dividends Reasons why corporations issue stock dividends: Satisfy stockholders’ dividend expectations without spending cash. Increase the marketability of the corporation’s stock. Emphasize that a portion of stockholders’ equity has been permanently reinvested in the business. Dividends Effects of Stock Dividends Changes the composition of stockholders’ equity. Total stockholders’ equity remains the same. No effect on the par or stated value per share. Increases the number of shares outstanding. Dividends Dividends Stock Split Reduces the market value of shares. No entry recorded for a stock split. Decrease par value and increase number of shares. Dividends Illustration: Assuming that instead of issuing a 10% stock dividend, Medland splits its 50,000 shares of common stock on a 2-for-1 basis. Dividends Differences between the effects of stock dividends and stock splits. Dividends Review Question Retained Earnings Retained earnings is net income that a company retains for use in the business. Net income increases Retained Earnings and a net loss decreases Retained Earnings. Retained earnings is part of the stockholders’ claim on the total assets of the corporation. A debit balance in Retained Earnings is identified as a deficit. Retained Earnings Retained Earnings Restrictions can result from: Legal restrictions. Contractual restrictions. Voluntary restrictions. SO 7 Prepare a comprehensive s